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Davis v. Deutsche Bank National Trust Co.

United States District Court, E.D. Pennsylvania

December 12, 2017

DENISE M. DAVIS and R. CRAIG DAVIS, Plaintiffs
v.
DEUTSCHE BANK NATIONAL TRUST COMPANY AS TRUSTEE, HOMEWARD RESIDENTIAL, INC., and OCWEN LOAN SERVICING, LLC, Defendants.

          MEMORANDUM

          Henry S. Perkin, M.J.

         This matter is before the Court on Defendants' Motion to Dismiss Amended Complaint or, in the Alternative, for Summary Judgment filed on October 18, 2017. Defendants' Brief in Support of Motion to Dismiss Amended Complaint, or in the Alternative, for Summary Judgment was filed on October 18, 2017. Plaintiffs' Brief in Opposition to the Defendants' Motion to Dismiss was filed on November 16, 2017. Defendants' Reply Brief in Support of Motion to Dismiss Amended Complaint or, in the Alternative, for Summary Judgment was filed on December 6, 2017. This Court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331. Having reviewed and considered the contentions of the parties, the Court is prepared to rule on this matter.

         I. PROCEDURAL HISTORY

         Plaintiffs R. Craig Davis and Denise Davis (“Plaintiffs”) initiated this matter on September 16, 2016 against Defendants Deutsche Bank National Trust (“Deutsche Bank”), Homeward Residential, Inc. (“Homeward”), and Ocwen Loan Servicing, LLC (“Ocwen”) (collectively, “Defendants”) in the Court of Common Pleas of Lancaster County. On October 13, 2016, Defendants filed a Notice of Removal to this Court. On November 17, 2016, Defendants filed a Motion to Dismiss Complaint. Thereafter, on September 19, 2017, this Court granted Defendants' Motion. Counts I, II, III, and V of the Complaint were dismissed without prejudice, and Plaintiffs were given the opportunity to file an amended complaint. On October 3, 2017, Plaintiffs filed their First Amended Civil Action (“Amended Complaint”) (Dkt. No. 16). In Count I of the Amended Complaint, Plaintiffs allege a claim for breach of contract against Deutsche Bank and Homeward. In Count II of the Amended Complaint, Plaintiffs allege a claim for breach of contract against Deutsche Bank and Ocwen. In Count III of the Amended Complaint, Plaintiffs allege Ocwen violated the Real Estate Settlement Procedures Act.

         II. FACTUAL BACKGROUND

         Taking the averments in the Amended Complaint in the light most favorable to the Plaintiffs, as the non-moving party, the pertinent facts to this Court's determination are as follows:

         On January 6, 2006, Plaintiffs obtained a loan from American Bank in the amount of $260, 000. Am. Compl., ¶ 21. Plaintiffs granted American Home Bank a mortgage as security for repayment of the loan on their home located at 5 Thicket Lane, Lancaster, PA 17602.[1] Id., ¶ 22. American Home Bank assigned the mortgage to Option One Mortgage Corporation in 2006, which then assigned it to Deutsche Bank in 2015. Am. Compl., Ex. A, p. 1. The mortgage agreement provides that the lender may hire or appoint a loan servicer to collect loan payments and administer the loan. Id., ¶ 21. The mortgage is a federally qualified loan as defined by the Real Estate Settlement Procedures Act (“RESPA”). Id., ¶ 23. Payments under the loan were $1, 858.18, and it is not apparent that an escrow account for payment of taxes and insurance was established at the inception of the loan. Id., ¶¶ 24, 25.

         The mortgage states that the “[b]orrower shall pay all taxes, assessments, charges, fines and impositions attributable to the Property which may attain priority over this [mortgage].” Defs.' Br., Ex. 1, p. 3 § 4. In and around 2011, the Plaintiffs fell behind in payment of the property taxes. Am. Compl., ¶ 28. In July 2012, Plaintiffs paid delinquent taxes in the amount of $5, 599.54. Id., ¶ 29. Homeward, the loan servicer at this time, also paid the delinquent taxes. Id., ¶ 31. Plaintiffs notified Homeward that Plaintiffs had already paid the taxes and Homeward received a refund for the duplicate tax payment from the taxing authority. Id., ¶¶ 32, 33. The mortgage provides that the “[l]ender may at any time, collect and hold [funds for escrow items] in an amount not to exceed the maximum amount a lender for a federally related mortgage loan may require.” Defs.' Br., Ex. 1, p. 2 § 2. The mortgage further states that all payments received will be applied in the following order: first to prepayment charges due under the note, then to funds for escrow items, then to interest due, then to principal due, and finally to late charges due under the note. Id., Ex. 1, p. 3 § 3.

         Following the delinquent tax issue, Homeward began to attribute Plaintiffs' payment to an escrow account. Am. Compl., ¶ 35. Plaintiffs were not notified of the imposition of the escrow account or the new attribution of Plaintiffs' payments to the escrow account rather than to interest and principal. Id., ¶¶ 37, 39. Shortly thereafter, Defendant Ocwen replaced Homeward as the Plaintiffs' mortgage loan servicer. Id., ¶ 41. As the new mortgage servicer, Ocwen also required a tax escrow.[2] Id., ¶ 45. Ocwen attributed Plaintiffs' payments to the escrow account rather than interest and principal. Id., ¶ 47. Ocwen demanded a new monthly payment of $ 2, 424.71, which is $566.53 more than the Plaintiffs' monthly payment prior to creation of the escrow account. Id., ¶¶ 53, 54.

         Upon notification of the change in payment amount, Plaintiffs wrote to Ocwen on several occasions, requesting that Ocwen review its escrow analysis, which Plaintiffs perceived to be improperly researched, erroneous, and double the appropriate amount. Id. ¶¶ 50, 51, 55. The Plaintiffs wrote to Ocwen on July 21, 2013 and August 21, 2013, but these letters went unanswered. Id., ¶¶ 56, 58, 60. On August 14, 2014, Plaintiffs' counsel wrote to Ocwen regarding the perceived errors with the escrow account, as counsel deduced from his review of Escrow Summary Statements. Id., ¶ 61; Ex. F, p. 1. Nearly two weeks after Ocwen received the August 14, 2014 correspondence from the Plaintiffs' counsel, Ocwen responded by sending Plaintiffs' counsel an account statement. Id., ¶¶ 62, 63. On August 28, 2014, Plaintiffs' counsel again wrote to Ocwen concerning the perceived errors with the escrow account. Id., ¶ 64. Ocwen did not respond to that letter. Id., ¶ 65. Ocwen then sued the Plaintiffs in foreclosure on July 8, 2015 in the Court of Common Pleas of Lancaster County. Am. Compl., ¶ 68; Ex. A, p. 1.

         III. STANDARD OF REVIEW

         On a motion to dismiss for failure to state a claim, courts accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief. Phillips v. County of Allegheny, 515 F.3d 224 (3d Cir. 2008). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide grounds for his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 554 (2007) (citation omitted).

         In order to survive a motion to dismiss, a complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662 (2009). A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged. Id. at 668. “Only a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at 679. When facing a motion to dismiss for failure to state a claim, district courts are directed to conduct a three-part analysis. Connelly v. Lance Constr. Corp., 809 F.2d 780, 787 (3d Cir. Jan. 11, 2016). First, it must “tak[e] note of the elements [the] plaintiff must plead to state a claim.” Iqbal, 556 U.S. at 675. Second, it should identify allegations that, “because they are no more than conclusions, are not entitled to the assumption of truth.” Id. at 679. See also Burtch v. Milberg Factors, Inc., 662 F.3d 212, 224 (3d Cir. 2011) (“Mere restatements of the elements of a claim are not entitled to the assumption of truth.” (Citation and editorial marks omitted)). Finally, “[w]hen there are well-pleaded factual allegations, [the] court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Iqbal, 556 U.S. at 679.

         IV. DISCUSSION

         “In deciding a Rule 12(b)(6) motion, a court must consider only the complaint, exhibits attached to the complaint, matters of public record, as well as undisputedly authentic documents if the complaint's claims are based upon these documents.” Davis v. Wells Fargo, 824 F.3d 333, 341 (3d Cir. 2016) (quoting Mayer v. Belichick, 605 F.3d 223, 230 (3d Cir. 2010)). Plaintiffs attach to the Amended Complaint the second page of the mortgage contract at Exhibit C. The Defendants, on the other hand, attach the entire mortgage contract to their Motion to Dismiss. See Defs.' Br., Ex. 1.

         Because the Plaintiffs have undisputed actual notice of all the information in the Defendants' motion and the Plaintiffs have relied upon this information in framing the Amended Complaint, this Court is able to view the entire mortgage contract on review of this motion to dismiss. Pension Benefit Guaranty Corp. v. White Consolid. Indus., Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (citing Cortec Indus., Inc. v. Sum Holding, L.P., 949 F.2d 42, 48 (2d Cir. 1991), cert denied, 503 U.S. 960 (1992)). See also Jacobs v. Halper, 116 F.Supp.3d 469, 473 n.1 (E.D. Pa. 2015) (quoting In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997) (entire catalogue attached as exhibit to motion to dismiss considered where same catalogue was attached in part as exhibits to amended complaint relied upon by plaintiff).

         A. Breach of Contract - Deutsche Bank and Homeward (Count I) and Deutsche Bank and Ocwen (Count II)

         In Count I of the Amended Complaint, Plaintiffs claim that the mortgagee, Deutsche Bank, and the first loan servicer, Homeward, breached the mortgage contract under Pennsylvania law. Specifically, Plaintiffs allege the following:

72. [Homeward] was acting as the loan servicer pursuant to the contract between Deutsche [Bank] and Plaintiff. Pursuant to this contract, [Homeward] had a duty to properly service the loan, provide appropriate notice of escrow changes, perform escrow analysis and provide both an initial escrow statement and a short year escrow statement so as to not manufacture default.
73. [Homeward] failed to notify Plaintiffs of the lifting of the escrow waiver and the ...

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